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10 top tips for successful financial forecasting

GP practice budgets continue to be squeezed harder and harder as costs seem to be continually on the rise and funding on the slippery slope downwards. As a result, financial forecasting is becoming more and more important. So how do practice managers get it right? Russell Finn, Specialist Medical Accountant at Harold Sharp, shares 10 top tips that will help you create accurate, realistic and effective forecasts.

1) Start point

Always have a reliable start point to build you projection around. The last set of accounts prepared by a professional agent will do, but do bear in mind that these accounts will be adjusted for timing differences that would not show up in monthly cash flows.

2) Keep it simple – And think about the outcomes

A full model is quite complex, so limit yourself to no more than three changes at a time in order to understand the outcomes. Don’t try to rush through it, as tempting as it may be.

3) Use the right tools

Most people will use an excel spreadsheet for a projection. However, be aware that it is easy to go wrong if you are not careful. There is software on the market which is available to help you make a projection, or some may even be in your existing package.

4) Adding new services

When looking at adding new services, don’t forget to check the timing of the payments and include them in the right period. Often services get paid well after the costs of providing the service has happened so make sure the practice can handle the shortfall.

5) Understand contact changes

Ever year there will be adjustments to the amounts you will be paid per patient and for completing services. So, it’s important to understand how these changes effect the Core Contract, Enhanced services and QOF income.

6) Changes in patients

Often the biggest financial changes come from changes in the patient list, so make sure you know what your current capitation is in order to understand the changes in your baseline and enhanced service claims. This article about patient list churn could be helpful when forecasting.

7) Understand the full cost of staff

When putting in an estimate for new starters and leavers, don’t forget that most staff members will have employer’s national insurance contributions, employer’s pension contributions, professional subscriptions and HR support. Also, don’t forget simple things like tea, coffee and an invite to the Christmas Party. Recruitment can also be costly, so if you’re planning future changes to staff, ensure it goes into the forecast.

8) Understand changes to the law

In the past few years we have seen a raft of new laws that have inflated costs, such as the national living wage and pensions auto enrolment for starters. Keep an eye on what upcoming law changes are happening and ensure they’re costed and included.

9) Review the outcome against actuals

It’s is important to see how predictions compare against results, so it is important to compare the budget again the actual results, then take what you’ve learnt back into the projection.

10) Professional review

Most accountants would be happy to prepare or review the projection for you to ensure the projections are as accurate as possible, some will also include it as part of their ongoing fees. Where this service is available, use it – it can only help to ease the pressure on you.

What other forecasting tips can you share? How do you ensure your forecasts are accurate? Let us know by commenting below or take it to the Practice Index forum here.